FDIC premiums unpaid for a decade

[Jacob]

So, the FDIC apparently didn't collect premiums from a number of banks during 1996-2006.

http://www.boston.com/news/nation/washington/articles/2009/03/11/now_needy_fdic_collected_little_in_premiums/?page=full?ref=fp1

WASHINGTON - The federal agency that insures bank deposits, which is asking for emergency powers to borrow up to $500 billion to take over failed banks, is facing a potential major shortfall in part because it collected no insurance premiums from most banks from 1996 to 2006.

The Federal Deposit Insurance Corporation, which insures deposits up to $250,000, tried for years to get congressional authority to collect the premiums in case of a looming crisis. But Congress believed that the fund was so well-capitalized - and that bank failures were so infrequent - that there was no need to collect the premiums for a decade, according to banking officials and analysts.

Now with 25 banks having failed last year, 17 so far this year, and many more expected in the coming months, the FDIC has proposed large new premiums for banks at the very time when many can least afford to pay. The agency collected $3 billion in the fees last year and has proposed collecting up to $27 billion this year, prompting an outcry from some banks that say it will force them to raise consumer fees and curtail lending.

Major disaster or just another minor snafu?  How significant is this?

[KRonn]

No problem... what could possibly go more wrong??   ???

[Neil]

Wow.  Congress is fucking stupid.

As days go by, more and more we are all starting to realize that the American Rebellion was a mistake.

[Grey Fox]

This belief that markets regulates themselves is just retarded.

[Habbaku]

This belief that markets regulates themselves is just retarded.

Non sequiturs are retarded.

The FDIC is a government entity.

[Neil]

This belief that markets regulates themselves is just retarded.

It's absolutely true, but it's not a gentle process at all.  Left to their own devices, the markets would self-regulate with massive job losses, bankruptcies and foreclosures.  The whole point of imposing regulation on the market is to limit these busts, at the expense of taking some of the peak off of the booms.

[DontSayBanana]

Wow.  Congress is fucking stupid.

As days go by, more and more we are all starting to realize that the American Rebellion was a mistake.

Summing up my response from another thread, the problem with American finance isn't capitalism; it's Americans.

[KRonn]

So, the FDIC apparently didn't collect premiums from a number of banks during 1996-2006.

http://www.boston.com/news/nation/washington/articles/2009/03/11/now_needy_fdic_collected_little_in_premiums/?page=full?ref=fp1

WASHINGTON - The federal agency that insures bank deposits, which is asking for emergency powers to borrow up to $500 billion to take over failed banks, is facing a potential major shortfall in part because it collected no insurance premiums from most banks from 1996 to 2006.

The Federal Deposit Insurance Corporation, which insures deposits up to $250,000, tried for years to get congressional authority to collect the premiums in case of a looming crisis. But Congress believed that the fund was so well-capitalized - and that bank failures were so infrequent - that there was no need to collect the premiums for a decade, according to banking officials and analysts.

Now with 25 banks having failed last year, 17 so far this year, and many more expected in the coming months, the FDIC has proposed large new premiums for banks at the very time when many can least afford to pay. The agency collected $3 billion in the fees last year and has proposed collecting up to $27 billion this year, prompting an outcry from some banks that say it will force them to raise consumer fees and curtail lending.

Major disaster or just another minor snafu?  How significant is this?

What the heck? Another massive failure by Congress? On top of their failure, incompetence and/or inability, to take corrective action to address financial issues that have become a disaster? Some in the know in business or politics realized the possible looming problems for some years.  *sigh*

[DontSayBanana]

So, the FDIC apparently didn't collect premiums from a number of banks during 1996-2006.

http://www.boston.com/news/nation/washington/articles/2009/03/11/now_needy_fdic_collected_little_in_premiums/?page=full?ref=fp1

WASHINGTON - The federal agency that insures bank deposits, which is asking for emergency powers to borrow up to $500 billion to take over failed banks, is facing a potential major shortfall in part because it collected no insurance premiums from most banks from 1996 to 2006.

The Federal Deposit Insurance Corporation, which insures deposits up to $250,000, tried for years to get congressional authority to collect the premiums in case of a looming crisis. But Congress believed that the fund was so well-capitalized - and that bank failures were so infrequent - that there was no need to collect the premiums for a decade, according to banking officials and analysts.

Now with 25 banks having failed last year, 17 so far this year, and many more expected in the coming months, the FDIC has proposed large new premiums for banks at the very time when many can least afford to pay. The agency collected $3 billion in the fees last year and has proposed collecting up to $27 billion this year, prompting an outcry from some banks that say it will force them to raise consumer fees and curtail lending.

Major disaster or just another minor snafu?  How significant is this?

What the heck? Another massive failure by Congress? On top of their failure, incompetence and/or inability, to take corrective action to address financial issues that have become a disaster? Some in the know in business or politics realized the possible looming problems for some years.  *sigh*

I'm trying to summon up the vitriol, and I just can't. The private sector knew about problems, chose to overlook them, the public sector knew about problems and tried to overlook them... it's systemic. The more I hear about this, the more I'm realizing the problems are cultural reform issues as well as business reforms.

[Liquid Poo]

Which party controlled Congress during this period?  ;D

[KRonn]

Which party controlled Congress during this period?  ;D

Repubs controlled then, or at least half that time, maybe the whole time. But the Dems had a say, especially since both parties were reasonably balanced in numbers until the last election. It would be a bit interesting to see if any pols brought up warnings, but the end result was no action taken.

[Admiral Yi]

On a related note 60 Minutes did a story about an FDIC takeover of a bank.  Small (5 branch) bank, Heritage Savings Bank IIRC.  Thing that struck me was they paid off depositors *above* 250K.

[jimmy olsen]

Crazy. How the hell was that allowed? The people responsible should be jailed.

[The Minsky Moment]

Evidently, the concept of insurance proved too complex for the great minds on capitol hill.

[vinraith]

Wow.  Congress is fucking stupid.

As days go by, more and more we are all starting to realize that the American Rebellion was a mistake.

Summing up my response from another thread, the problem with American finance isn't capitalism; it's Americans.

Exactly. Incidentally, that's also the problem with American democracy.